What Are Endowment Insurance Plans?
“An Endowment Plan an insurance product designed to help you meet your long-term financial goals.”
Endowment Plans not only offer you protection but also helps you to save your money and help it grow over a period of time. You get a lump-sum amount called the maturity benefit after the policy term comes to an end. While term plans only provide you with a life cover, Endowment Plans go one step forward and benefit the policyholder in two ways – they not only provide you with life insurance, but also return on your investment. Typical maturities are ten, fifteen or twenty years up to a certain age limit. Some policies also pay out in the case of critical illness.
An endowment policy is a form of life insurance coverage that combines the benefit of life insurance and savings under a single policy. The death benefit offered under an endowment plan helps policyholders protect their families from unforeseen circumstances. Unlike a term insurance cover, endowment policies provide maturity benefits if the insured person outlives the policy term. With regular investments, policyholders can build a corpus large enough to take care of specific milestones like retirement, children’s education, buying a house, etc., while also having the added advantage of life coverage.
Being a savings-oriented life insurance plan, most of the endowment policies in the market provide guaranteed returns for policyholders along with additional bonuses. The savings portion of the money invested in an endowment policy is invested in bonds and other securities to generate returns. Endowment policies are ideal for investors who prefer risk-free, long-term investments. Most of the top insurers in the market have endowment plans in their product lineup. The benefits and returns may vary from one policy to another. If you are looking for an endowment policy to invest, you need to do quick research about the products available in the market and pick the best one suitable for you.
Why do you need an Endowment Policy?
Your dreams and aspirations need to be secured. Your social and family obligations need to be fulfilled. An endowment plan is designed to do precisely that. You get the dual benefit of life insurance as well as wealth accumulation through years of regular investing. Moreover, it brings tax benefits on two fronts, too. Your premium is tax-deductible and so is the maturity corpus.
For individuals with responsibilities of meeting large expenses in the future, endowment plans are a blessing. They have relatively low risk, yet give proportionately higher tax adjusted returns. The sum assured offered by a term insurance policy is paid only if the insured person dies within the policy term. However, this is not the case with an endowment policy. A lump sum amount on death and guaranteed maturity amount on survival also ensure that neither you nor your loved ones are left unprotected.
Endowment plan motivates you to save and protect you and your family in the time of crises or in your absence. A plan that gives you both maturity benefits and death benefits is better in case you outlive the policy. An endowment policy not only helps your family in case of your demise, but also helps you take care of large expenses that come later in life, such as education of children or grandchildren, children’s wedding, medical procedures, retirement needs, buying a house, etc.
Benefits Of Endowment Plans
Endowment plans offer a safe and tax free way to invest your money and get insurance cover at the same time. So for those looking to save tax and are not comfortable with mutual funds etc. find this as an attractive mode of investments. Also it forces long term savings and ensures that the money returned at the end of the policy term is a handsome amount.
Regular saving is important. Endowment plan help you eveloping it.
You are insured for the longest. Time, which give Financial Security to your family.
Additional riders can help you in time of critical illness etc.
Premium invested and returned are both deductible under Article 80C.
Help financing your children’s future to your new venture.
You also get some amount of death benefit in Endowment plans.
Get guaranteed return even in market uncertainties by investing in Endowment Plans.
Invest regularly now and fund you own person.
Types of Endowment Policies
The following types of endowment policies are available in the Indian market currently:
These are endowment plans in which the policyholder is a participant in the insurance company's growth. This means that the company will give a small portion of its profits to the policyholder along with death or maturity benefit in the form of bonus. Max Life Gain Premier Savings Plan is an example of this kind of policy.
These are policies in which the policyholder does not get a part of the company's profits. Non-participating schemes do not pay any additional bonuses to the policyholder along with the maturity or death benefit. SUD Life Ashirwad is an example of this kind of endowment plan.
Whole life or full endowment policy
This kind of policy covers your entire life - up to 100 years - with a basic sum assured. Bonuses are added to the death or maturity benefits as and when your account makes profits.
Money back endowment plans ensure that you get regular returns from your investment instead of a lump sum at the end of the policy period or at death. You may get money back every year, or every 5 years, during the last 5 years of your policy, or other options, depending on the terms of the policy.
Other than this, endowment policies can be differentiated based on payment of premiums as given below:
Under this, you need to make premium payments regularly as long as the policy is active and the policyholder is alive. The frequency can be as chosen by you - every month, every three months, every six months or once a year.
Here, you need to pay only for a specified number of years out of the total policy tenure. This could be 5 years, 7 years, 10 years or 15 years, depending on the insurer and the product.
When you need to make just one payment towards your plan, it is known as a Single Pay policy.
How Does An Endowment Plan Work?
A rough timeline of an endowment plan is such: after you pay your first premium, your policy commences. Like all insurance plans, you have to pay a premium amount as per the decided frequency every year. A part of this premium will go towards the sum assured, a small part will cover your fees and administrative expenses, while another part will be invested for you in bonds, funds and other investment forms. Some endowment plans give you extra benefits such as cashback, annual bonuses, and vested/reversionary bonuses at maturity. You can add riders to the plans to increase your protection and get a higher death benefit or maturity benefit. In case If the policyholder passes away before the date of maturity, His /Her Nominee will receive the death benefit, which includes the sum assured amount and the guaranteed bonuses. If the policyholder survives the policy term up to the date of maturity, you receive the survival benefit – a lump sum amount multiplied over the years. So, This way, you’re protected both in life and death.